Apple drops iPad 2, inserts 4th-gen Retina iPad into $399 price slot

Apple today replaced the iPad 2 with 2012's fourth-generation Retina iPad as its lowest-priced tablet, a likely reaction to both pressure from cheap Android tablets and the advanced age of the iPad 2.

The fourth-generation iPad was priced today at $399 with 16GB of storage space, the same price Apple previously charged for the iPad 2, which first went on sale three years ago. Apple had kept the iPad 2 in inventory so it could offer a tablet at a lower price than its flagship, now the iPad Air, which lists for $499.

Analysts who tracked iPad 2 sales pegged most of them going to educational institutions and businesses that bought tablets in bulk.

Apple touted the swap, putting the fourth-generation iPad's higher-resolution screen in pride of place. "Now for $399 customers can get iPad with a stunning 9.7-inch Retina display, fast A6X chip, and 5MP iSight camera, offering a dramatic upgrade in power, performance and value compared to the iPad 2 it replaces," said Philip Schiller, Apple's marketing chief, in a statement.

A fourth-generation iPad with Retina equipped with a cellular radio was priced at $529, also $100 less than the equivalent iPad Air. The newer iPad is able to connect to a carrier's LTE network as well as the slower 3G, which was the iPad 2's limit.

Apple's switcheroo came in the face of increased competition in the tablet market, which in general has showed signs of slowing down and for Apple specifically, has been dominated by cheaper tablets as companions, not replacements, for existing personal computers.

Earlier this month, researcher IDC cut its 2014 tablet shipment forecast, saying that shipments would grow about 19% this year, a dramatic decrease in gains from last year's 52%. The less impressive growth, said IDC, would be triggered by slowing consumer sales as "hardware iterations slow" and as opportunities in developed countries drop off because of the massive sales spurt in the last two years.

"It's becoming increasingly clear that markets such as the U.S. are reaching high levels of consumer saturation," said Tom Mainelli of IDC in January. "Softness in the consumer segment -- brought about by high penetration rates and increased competition for the consumer dollar -- point to a more challenging environment for tablets in 2014 and beyond."

IDC forecast that 86% of 2014's global tablet shipments would be to consumers.

With the newer iPad in the lowest-priced position in its portfolio, Apple will be able to trumpet the higher-resolution screen as it tries to compete with cheaper, but less-powerful and lower-resolutions devices from rivals.

The fourth-generation Retina iPad returned to the Apple online store today -- after a four-and-a-half-month absence -- with new orders shipping within 24 hours from the U.S. mart.